Can an Indian continue with her PPF and NPS Tier II account after settling in US?

Moving to the US after marriage can change how an Indian resident manages savings and investments back home. For NRIs, questions around PPF, NPS, fixed deposits and gifting money to family can become particularly important as their residential status changes.

In this case, the reader wants to know whether her daughter can continue contributing to her PPF after becoming a non-resident, what happens to her NPS Tier-II balance, and whether existing FDs should be retained or gifted to her parents. Here’s what an expert advises. Today's Q&A explains such details in response to a query by a reader.

She can let the existing FDs continue but inform the bank about change of her residential status under FEMA so that the bank designates the same as NRO deposits and deduct tax at appropriate rate on interest. She can also prematurely withdraw the FD but the bank will deduct penal interest for premature withdrawal.

After withdrawal the money can be gifted to father or mother depending on whose tax liability is lower without attracting any tax liability for any one in respect of gifts so made. There will not be any clubbing of income in either of the situation. The parents can also make gifts of any sum of money now or later without any clubbing or tax implication. There may be tax implications in the country of her residence at the time of making or receiving the gift. It may be treated as her income in the country of her residence but no tax implications in India.

I would advise her to make gifts to her parents so as to reduce her India income significantly which will help her get out of requirement of having to file her Income Tax Return (ITR) here in India and also having to report the same to the US authorities.